$18.6 billion would represent the largest state budget in Oregon history — more than a billion dollar increase from the current budget cycle.

Where, Hyams asked, is the extra money coming from?

Lehman explained that Oregon’s revenue structure is weighted heavily towards the income tax. Roughly 83 percent of expected state revenues over the next two years will come from personal income taxes. The rest comes from corporate taxes and a smattering of other sources including the lottery, tobacco taxes and estate taxes.

But to the question of where the increase is coming from, Lehman said, the answer is simply that the economy is improving. More people are employed, and wages are higher. So, there are more people paying income taxes on a higher pool of income. Oregon’s revenues are very dependent on the boom and bust cycle of income taxes, and right now the cycle is on the upswing.

Lehman went on to say that by and large, additional incoming revenue is going to existing programs but the governor is channeling some money toward early childhood education and also proposing tax breaks for people in low wage jobs.

Kitzhaber wants to make it more likely that every Oregon child is reading at grade level by third grade, something he says is a key indicator for future educational success.

And, explained Lehman, the proposed tax breaks for people in low wage jobs would come in the form of a tax credit so that people don’t get caught in a catch-22 of having to choose between staying on public assistance or taking a new job and therefore losing their benefits.

As Governor Kitzhaber put it in his speech today: “With the creation of the Working Family Additional Tax Credit,” this budget will help smooth out the income cliff for those trying to move up the income ladder between $9.10 an hour and $17.10 an hour.”

The video below, part of a recent series on the Working Poor, clearly illustrates how the benefits cliff works.

And what, Hyams asked, will come next for the governor’s budget proposal?

“Well, Lehman said, “there’s an old saying around the state capitol: The governor proposes, and the legislature disposes. Another way of saying that is that this is simply a proposal.”

Legislative budget-writers will now come up with their own budget and lawmakers will vote on that. And then the governor can sign it or veto it. The main difference between the way the governor creates a budget and the legislature creates a budget is that the legislature holds public hearings along the way, so the public can have input and get a better sense of what’s on the table a little bit earlier in the process.

The Oregon Constitution requires the governor to propose a budget by December 1 in the year preceding the legislative session.

Lehman pointed out that with Kitzhaber’s fellow Democrats in firm control of both the Oregon House and the Oregon Senate, it’s unlikely that future proposals will differ dramatically. But lawmakers will have plenty of opportunities to hear from interest groups over the next few months as they come up with their own spending plan.